Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows:
| |
Ending Balance |
Beginning Balance |
| Cash |
$ |
48,000 |
$ |
57,000 |
| Accounts receivable |
|
41,000 |
|
44,000 |
| Inventory |
|
55,000 |
|
50,000 |
| Property, plant, and equipment |
|
150,000 |
|
140,000 |
| Less accumulated depreciation |
|
(50,000) |
|
(35,000) |
| |
|
|
|
|
| Total assets |
$ |
244,000 |
$ |
256,000 |
| |
|
|
|
|
| Accounts payable |
$ |
32,000 |
$ |
57,000 |
| Income taxes payable |
|
25,000 |
|
28,000 |
| Bonds payable |
|
60,000 |
|
50,000 |
| Common stock |
|
70,000 |
|
60,000 |
| Retained earnings |
|
57,000 |
|
61,000 |
| |
|
|
|
|
| Total liabilities and stockholders' equity |
$ |
244,000 |
$ |
256,000 |
|
|
|
|
|
|
|
During the year Ravenna paid a $6,000 cash dividend and it sold a piece of equipment for $3,000 that had originally cost $6,000 and had accumulated depreciation of $4,000. The company did not retire any bonds or repurchase any of its own common stock during the year.
|
| a. |
If the company debited cost of goods sold and credited inventory for $400,000 during the year, what is the total amount of inventory purchases recorded on the debit side of the Inventory T-account and the credit side of the Accounts Payable T-account?
|
| b-1. |
What is the total amount of the debits recorded in the Accounts Payable T-account during the year?
|
| Total amount of debits recorded |
$ |
| b-2. |
What does the amount of these debits represent?
|
|
|
|
|
Purchases |
|
Supplier payments |
|
Cash collections |
|
Sales |
|